The Music Fades Out

In recent days, the combination of extreme valuations and unfavorable market internals has been joined by acute dispersion in daily trading data that often occurs within a few days of pre-collapse peaks in the market. My opinion is that the music has already quietly faded out like the end of a pop song, in a wholly uneventful way, and that even a surprise push to further highs would be marginal. Still, as a practical matter, there’s no need for opinions or forecasts about future market behavior – it’s enough to align ourselves with prevailing conditions, and to change our stance as observable conditions change.

 

Be careful to distinguish the level of valuations, which have been extreme for quite some time, from the consequences of overvaluation, which depend on surrounding market conditions. While valuations provide an enormous amount of information about long-term investment prospects, and likely downside risk over the completion of any cycle, the information from valuations is often entirely useless and even detrimental over shorter segments of the market cycle. The question isn’t whether valuations are useful, but when.

 

Red more here...

Share on Facebook
Share on Twitter
Please reload

Suggested Posts

EVERYTHING YOU WANTED TO KNOW ABOUT MMT

February 6, 2019

1/10
Please reload

Current Posts

April 17, 2019

Please reload

Archive
Please reload

Hashtags